How can investors meet the 2025 deforestation deadline?
Jeff Milder, director of the Accountability Framework initiative (AFi), explores how financial institutions can engage their portfolios to tackle GHG emissions linked to deforestation in company supply chains
2025 is pivotal year for protecting forests and other natural ecosystems. To reach net zero emissions and avoid the worst impacts of biodiversity loss, it is urgent for companies to transform agricultural supply chains to eliminate deforestation and conversion of other natural ecosystems. But most food and agriculture companies are falling behind, which poses increasing risks for their investors. Business-as-usual commodity production also results in widespread human rights violations affecting Indigenous Peoples, local communities, and workers.
These environmental and social harms can translate directly into legal, market, operational, regulatory, and reputational risks that can threaten companies’ financial performance. Increasingly, they are material issues for companies’ investors, lenders, and customers. They are also a growing focus of governments, which have adopted policies such as the EU Deforestation Regulation (EUDR) to address the negative impacts of agricultural supply chains.
For all these reasons, numerous companies, financial institutions, industry associations, and the 22 environmental and human rights organizations making up the Accountability Framework initiative (AFi) aligned on 2025 as the deadline for addressing commodity-driven deforestation. Now 2025 is here, but disappointingly few companies are on track to achieve this goal. Even those leading amongst their peers have discovered challenges to implementing their policies within some supply chain segments.
2025 is a moment for investors to push for rapid progress
Given these challenges, the AFi is calling on companies to take concrete action this year to address deforestation risk across their businesses. For financial institutions exposed to deforestation through their portfolios and investments, 2025 also presents a key moment for action. To mitigate their own risk, investors should ask companies in their portfolios to advance as far as possible towards deforestation- and conversion-free supply chains in 2025. Companies should prioritize areas where supply chains impacts on forests and human rights—and corresponding business risks—are most significant. Investors should also assess how their portfolio companies are addressing risks tied to their agricultural and forestry products, for instance by improving traceability, monitoring systems, procurement practices, and supplier engagement.
Maintaining momentum beyond 2025
The AFi also offers a path forward for companies to signal to investors and other stakeholders their ambitions, milestones, and plans to address deforestation and conversion post-2025. For companies that lack time-bound commitments, a first step is to set no-deforestation and no-conversion policies in alignment with the Accountability Framework, including ambitious target dates. Investors should evaluate their portfolios to understand which companies have yet to take this overdue first step.
To mitigate deforestation-related risk across their portfolios, investors should also look for companies to have clear, timebound plans addressing the most critical gaps. For both existing and new commitments, companies should set and publish annual quantitative milestones indicating expected year-on-year-progress until their commitments are fulfilled. These should be accompanied by publicly available implementation plans that describe the specific actions they intend to take until their supply chains are deforestation- and conversion-free. Companies that expect not to meet 2025 target dates or other timebound milestones should be transparent about the challenges that impede progress, and ensure that implementation plans explain when and how they will close any remaining gaps. This enables investors to systematically track progress, and target engagement across their portfolios.
Disclosure is a final key element for companies to communicate transparently to their business partners and stakeholders. Financial institutions in particular look to these disclosures to ensure their investments are secure. Each year, companies should publicly disclose their supply chain risks, performance, and progress towards halting deforestation and conversion linked to their supply chains. In line with the AFi’s recommendations, disclosures should cover all commodity production and sourcing. Companies can use the CDP questionnaire, which opens on June 16, to disclose on the deforestation- and conversion-free status of their commodity volumes.
Why we’re hopeful
Ending deforestation worldwide is a massive endeavor, but many companies have already demonstrated how business can be at the vanguard of this critical transformation by eliminating deforestation from commodity production and sourcing. For instance, as we reported last year, 64 companies disclosed via CDP that at least one of their major commodity supply chains was 100% deforestation- or conversion-free, while providing evidence based on standardized methods to support their claims. These achievements are recognized and celebrated by civil society voices such as the AFi. They also position these leading companies for competitive advantage into the future, which will generate long-term value for their investors.
Wherever your agricultural and forestry portfolio companies are on their emissions reductions journeys, the Accountability Framework can help them move from ambition to impact. To get started, explore our resources for financial institutions on assessing risk, and managing and engaging your portfolio.
